Why Reinsurance Group (RGA) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Reinsurance Group in Focus
Headquartered in Chesterfield, Reinsurance Group (RGA) is a Finance stock that has seen a price change of 1.52% so far this year. The reinsurance company is paying out a dividend of $0.73 per share at the moment, with a dividend yield of 2.48% compared to the Insurance - Life Insurance industry's yield of 0.46% and the S&P 500's yield of 1.4%.
Looking at dividend growth, the company's current annualized dividend of $2.92 is up 4.3% from last year. Reinsurance Group has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 13.73%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Reinsurance Group's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RGA for this fiscal year. The Zacks Consensus Estimate for 2021 is $9.48 per share, representing a year-over-year earnings growth rate of 25.73%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, RGA presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
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